Silicon Valley is the Only Place for Startups

This month Paul Graham has told the world that the only place to be is Silicon Valley if you want to have the very best chance of being a successful startup. Paul an active voice in Y Combinator even encourages his Boston based startups to move to Silicon Valley. Boston is the second largest startup hub in the US and the world for that fact, but still Paul believes startups should still move and he believes he can make a strong case for that belief.

Paul’s first argument is one of localization, the best place to be is the place with infrastructure, accumulated knowledge, and other individuals attempting similar undertakings. He then caveats this with a number of reasons why one might not move including family, immigration, industry localization, immigration, and of course investment money. Any of those items could be cause to not move a business and Paul stresses the fact that he isn’t saying startups cannot succeed outside of Silicon Valley, only that they have a much better chance in Silicon Valley.

Paul’s second and maybe much more powerful argument that doesn’t carry caveats is that west coast investors are more aggressive than basically any other investors in the world. He supports this claim from both personal experience and from what he sees has happened in the Valley over the course of time. It seems west coast investors trend towards being willing to commit their resources much more quickly to a startup.

I would like to caveat this section myself and ask the readers a question of even Paul himself should he notice this article, does the more aggressive investor demand a larger percentage of the business for the same amount of investment dollars offered by a less aggressive investor? While a cash investment is always good, do the bolder investors need to see a larger return because they have taken to many risks?

Finally Paul concludes with the idea that startups are a market within themselves and returns to his localization ideas that he had made previously. Paul has some very strong ideas and in a world where all things are equal Silicon Valley maybe the place for startups, but with so many caveats to his argument it sounds more controversial than maybe it really is. Still all in all it is definitely food for thought.

There are two things that investors look for, one high probability of capital appreciation and two a fit with larger corporations to who, the start up’s shares can easily be sold off at a future date. So, why should location be any kind of constraint?